Spanish Income Tax Warning For Expats

March 28, 2010 - PRLog -- James Baker, a UK chartered accountant and a senior of Spanish tax advisers Advoco Law & Accountancy, said “British and other foreign residents who do not declare their taxes properly are running a bigger risk than ever this year”.  He went on to highlight three areas of concern:

1.   Not making a declaration

“Many people living in Spain think they can live here underneath the radar of the tax authorities and not make a declaration.  The Spanish tax office, or Agencia Tributaria, has traditionally been slow to chase up people who do not declare but things are changing.  

With the government desperate for funds they are under more pressure than ever before to close loopholes and maximise revenue collected.  Unless you are living here without an fiscal identifty number (“NIE”) and have no bank accounts, you cannot be certain of avoiding detection if you have income but don’t declare it.

Some residents think they can avoid declaring for tax because they have insufficient income to make a return compulsory.  A widely held belief is that those with income below €22.000 are exempt from declaring but, in some circumstances, income as low as €1.000 requires a return”

2.   Erroneous declarations

“If you are Spanish tax resident you are obliged to declare all sources of income including, for the most part, those generated abroad.  Just because income has been subject to tax elsewhere does not necessarily make it exempt in Spain although there are exceptions.  

Nor can you rely on the Agencia Tributaria to miss errors and omissions.  The Finance Minister has said their major goal is the fight against fraud and this year, for the first time, they are integrating information received from other fiscal sources – like VAT records – to check returns for accuracy.”

3.   Offshore investments

“There may have been a time when offshore investments were more or less invisible to the onshore authorities but that has well and truly passed.  Most traditional offshore centres such as the Isle of Man, Channel Islands and Gibraltar have signed Tax Information Exchange Agreements (TIEAs) which allow EU countries access to account information.  While the usefulness of legitimate offshore arrangements may  not have been compromised, it is worth taking advice before even thinking about ignoring them for Spanish tax purposes.”

Advice for Spanish tax residents

Mr Baker advised any foreigners who were Spanish tax resident or who thought they might have some liability to take advice before May.  He said “with the amount of information available online, including Advoco’s guide to Spanish Income Tax 2010, there is no need to approach the Renta season blindly.  The biggest mistake is putting your head in the sand and hoping nothing happens.  If you have any doubts send an email to Advoco to clarify your status – it’s free and without obligation”.

Spanish income tax rates and allowances 2010
http://www.advoco.es/services/42-spanish-income-tax-rates...

"The Spanish tax season looms" -article
http://spanishinsight.blogspot.com/2010/02/busy-busy-span...

Do you need to submit a Spanish tax return - guide
http://www.advoco.es/services/39-do-you-need-to-submit-a-...

# # #

About Advoco:
Legal, accounting and tax advisers to the Spanish expat community. Senior partner James Baker is a Chartered Accountant, originally from London, now registered to practice in Spain.